Deutsche’s Luzzetti said it would take a real crack in the labor market and the consumer for the Fed to resume reducing rates. He expects policy to remain on hold next year even though he sees slowing growth pushing unemployment to 3.9%. It was 3.6% in October.

The bar to a rate hike seems even higher. Powell said that any decision to raise rates would be tied to the behavior of inflation, which remains stuck below the Fed’s 2% target.

“We would need to see a really significant move up in inflation that’s persistent before we would consider raising rates to address inflation concerns,’’ Powell said.

In describing the Fed’s current strategy, Powell has referred to the mid-cycle policy adjustment in 1995 and 1996, when Greenspan lowered rates three times after raising them previously.

The final cut back then came in January 1996, the start of a presidential election year. The central bank then kept rates unchanged for the rest of 1996.

“The Fed is probably on hold for a very long period of time,’’ Northern Trust’s Tannenbaum said.

This article provided by Bloomberg News.
 

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